It will continue to invest in strategic projects despite low oil prices and a fall in its net profit, understanding it operates in a cyclical market

May 2015

Saudi Basic Industries Corp (Sabic) faces heavy pressure on its profits due to cheap oil but will keep investing globally to boost capacity in key areas, its acting chief executive said after the company reported a plunge in first-quarter profit, reports Reuters.

Sabic, one of the world’s largest petrochemicals groups and Saudi Arabia’s biggest listed firm, said net profit sank to SR3.93 billion ($1.05 billion) in the three months to March 31 from SR6.44 billion a year earlier. Its sales values were slashed by the plunge of oil prices, which has dragged down petrochemical product prices. Revenues in the first quarter shrank 28 per cent from a year earlier and 18 per cent from the previous quarter to 35.56 billion riyals.

Yousef Abdullah Al Benyan, who took over from longtime CEO Mohamed Al Mady in February, said the fall in oil and petrochemical product prices was “out of control”, and that his company was continuing to look at its cost base with a view towards postponing non-vital spending.

But he also insisted Sabic would not cut back investments in strategic projects around the world, because it was looking ahead to an eventual upturn. He said areas of opportunity were chemicals in China, shale gas in North America, economic growth in Africa, and gross domestic product growth of about 4 per cent expected in Saudi Arabia this year.

“We always don’t change the key strategic projects, because we understand this is a cyclical market. We understand this is not going to stay forever, and we do not want to be left behind when the market bounces – we want to be the first player ready to enjoy the upcycle.”

Sabic’s first-quarter profit was actually higher than the average forecast of analysts polled by Reuters, who had predicted SR3.50 billion.

The company’s shares soared their 10 per cent daily limit after the stock market regulator announced it would open the bourse to direct foreign investment from June 15. As a top blue chip, Sabic is expected to attract a substantial chunk of the new foreign money.

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